<PAGE>
 
  Exhibit 10(xxiii) MAF Severance Benefits Program for Northwestern Employees.
<PAGE>
 
                            FIRST AMENDMENT TO THE
                        MAF SEVERANCE BENEFITS PROGRAM
                          FOR NORTHWESTERN EMPLOYEES



     Effective as of January 1, 1997, the definitions of "Plan Year" and
"Severance Event" in Section 1.3 of the MAF Severance Benefits Program for
Northwestern Employees are amended to read as follows:

          "Plan Year" means the period commencing on the Effective Date and
           ---------                                                       
     ending December 31, 1996, and each calendar year thereafter.

          "Severance Event" shall be deemed to have occurred if, and only if, as
           ---------------                                                      
     of the Effective Date, or prior to March 31, 1997, the termination of an
     Eligible Employee's employment with all Employers occurs, and such
     termination is employer-initiated for reasons attributable to the Merger
     and other than misconduct or unsatisfactory performance below acceptable
     standards pursuant to the Company's progressive discipline policy
     applicable to the Eligible Employee.
<PAGE>
 
                        MAF SEVERANCE BENEFITS PROGRAM
                          FOR NORTHWESTERN EMPLOYEES




                         EFFECTIVE DATE:  MAY 30, 1996
<PAGE>
 
<TABLE>
<CAPTION>
                               TABLE OF CONTENTS                           PAGE

<S>                                                                        <C> 
ARTICLE I..................................................................  1
     GENERAL...............................................................  1
       1.1     Purpose.....................................................  1
               -------
       1.2     Effective Date..............................................  1
               --------------
       1.3     Definitions.................................................  1
               -----------
       1.4     Controlling Authority.......................................  3
               ---------------------
       1.5     Sole Source of Severance Benefits...........................  3
               ---------------------------------

ARTICLE II.................................................................  3
     ELIGIBILITY AND BENEFITS..............................................  3
       2.1     Eligibility.................................................  3
               -----------
       2.2     Eligibility Exclusions......................................  3
               ----------------------
       2.3     Severance Pay...............................................  4
               -------------
       2.4     Form And Payment Of Severance Benefits......................  5
               --------------------------------------
       2.5     Lump Sum Death Benefit......................................  5
               ----------------------
       2.6     Other Benefits..............................................  5
               --------------

ARTICLE III................................................................  6
     PLAN ADMINISTRATION...................................................  6
       3.1     Administration of Plan......................................  6
               ----------------------
       3.2     Rules and Procedures........................................  6
               --------------------
       3.3     Claims Procedure............................................  6
               ----------------
       3.4     Actions of the Plan Administrator...........................  7
               ---------------------------------
       3.5     Delegation..................................................  7
               ----------
       3.6     Reliance on Experts.........................................  7
               -------------------

ARTICLE IV.................................................................  8
     LIMITATIONS AND LIABILITIES...........................................  8
       4.1     Non-guarantee of Employment.................................  8
               ---------------------------
       4.2     Non-alienation of Assets and Benefits.......................  8
               -------------------------------------
       4.3     Limitation of Liability.....................................  8
               -----------------------
       4.4     Indemnification.............................................  8
               ---------------

ARTICLE V..................................................................  8
     FUNDING...............................................................  8
       5.1     Funding.....................................................  8
               -------

ARTICLE VI.................................................................  9
     AFFILIATES............................................................  9
</TABLE> 

                                       i
<PAGE>
 
<TABLE>
<S>                                                                         <C>
       6.1     Obligation of Employers.....................................  9
               -----------------------
       6.2     Cooperation by Each Employer................................  9
               ----------------------------

ARTICLE VII................................................................  9
     AMENDMENT AND TERMINATION.............................................  9
       7.1     General.....................................................  9
               -------
       7.2     Amendments..................................................  9
               ----------

ARTICLE VIII...............................................................  9
     MISCELLANEOUS PROVISIONS..............................................  9
       8.1     ERISA.......................................................  9
               -----
       8.2     Applicable Law.............................................. 10
               --------------
       8.3     Exclusive Benefit of Participants........................... 10
               ---------------------------------
       8.4     Agent for Service of Process................................ 10
               ----------------------------
</TABLE>

                                      ii

<PAGE>
 
                        MAF SEVERANCE BENEFITS PROGRAM
                          FOR NORTHWESTERN EMPLOYEES

                                   ARTICLE I

                                    GENERAL

     1.1  Purpose.  It is the intention of MAF Bancorp, Inc. (the "Company")
          -------                                                
to create and maintain the MAF Severance Benefits Program for Northwestern
Employees (the "Plan") to provide Eligible Employees with income after
termination of employment under circumstances described herein, including, but
not limited to, the execution of the general release prescribed hereby.

     1.2  Effective Date.  The Plan shall become effective on the Effective
          --------------
Date of the Merger under that certain Amended and Restated Agreement and Plan of
Merger, dated as of November 29, 1995, by and between the Company and N.S.
Bancorp, Inc. (the "Merger Agreement").

     1.3  Definitions.  Each capitalized term not defined herein shall have
          -----------
the meaning ascribed to it under the Merger Agreement, unless the context
requires otherwise. Each term defined herein shall be given its defined meaning
wherever used in this document, unless the context requires otherwise.

          "Affiliate" means (1) the Company and any corporation or enterprise,
           ---------                                                          
     other than the Company, which, as of a given date, is a member of the same
     controlled group of corporations, the same group of trades or businesses
     under common control or the same affiliated service group, determined in
     accordance with Code Section 414(b),(c),(m) or (o), as is the Company or
     (2) a subsidiary of the Company where the Company is an owner of a majority
     of the voting securities of such corporation or enterprise or (3) any other
     corporation or enterprise deemed to be an affiliate by the Board of
     Directors of the Company.

          "Base Weekly Pay" means with respect to: (a) a salaried Employee, the
           ---------------                                                     
     Employee's base annual salary as of the Severance Event, divided by 52, and
     (b) an hourly Employee, the Employee's average weekly earnings based on
     such Employee's straight time earnings for the twelve month period ending
     with the last full week preceding the Severance Event.

          "Beneficiary" means the person or persons designated by an Eligible
           -----------                                                       
     Employee to receive the payment described in Section 2.5 in the event of
     the Eligible Employee's death while receiving Severance Pay.  Such
     designation shall be filed with the Committee on such form as the Committee
     may prescribe.  In the event an Eligible Employee fails to properly file a
     designation, then the "Beneficiary" shall be the Eligible Employee's
     estate.

                                       1
<PAGE>
 
          "Company" means MAF Bancorp, Inc.
           -------                         

          "Eligible Employee" means a Northwestern Employee who has satisfied
           -----------------                                                 
     all conditions of eligibility as provided in sections 2.1 and 2.2.

          "Employer" means the Company and any Affiliate thereof which employs a
           --------                                                             
     Northwestern Employee as an Employee on or after the Effective Date.

          "Employee" means an individual who provides services to the Company
           --------                                                          
     and any Affiliate as an employee for remuneration.

          "Northwestern Employee" means each Employee of N.S. Bancorp, Inc.,
           ---------------------                                            
     Northwestern Savings Bank (to be merged into Mid America Federal Savings
     Bank on the Effective Date) and each other Northwestern subsidiary as of
     the Effective Date (collectively, "Northwestern") employed as of the
     Effective Date, other than any Northwestern Employee who at any time on or
     after November 29, 1995 was or becomes a party to a written employment
     agreement with Northwestern, the Company or an Affiliate.

          "Plan Administrator" means the First Vice President-Administration of
           ------------------                                                  
     the Company or such other person or entity designated to administer the
     Plan and be the named fiduciary thereof.

          "Plan Year"  means the period commencing on the Effective Date and
          ----------                                                        
     ending December 31, 1996.

          "Severance Event" shall be deemed to have occurred if, and only if, as
           ---------------                                                      
     of the Effective Date, or prior to December 31, 1996, the termination of an
     Eligible Employee's employment with all Employers occurs, and such
     termination is employer-initiated for reasons attributable to the Merger
     and other than misconduct or unsatisfactory performance below acceptable
     standards pursuant to the Company's progressive discipline policy
     applicable to the Eligible Employee.

          "Severance Pay" means the benefit provided pursuant to Section 2.3.
           -------------                                                     

          "Week of Severance Pay" shall mean an amount equal to an Eligible
           ---------------------                                           
Employee's Base Weekly Pay determined as of the Severance Event.

          "Year of Service" means each full year of continuous employment with
           ---------------                                                    
     the Employer. For purposes hereof, if a Northwestern Employee has had a
     termination of employment prior to the Effective Date and was subsequently
     reemployed, for the sole purpose of computing the amount of Severance Pay
     under the Plan, his Years of Service shall be computed from his
     reemployment date.

                                       2

<PAGE>
 
     1.4  Controlling Authority.  This Plan document is the sole and controlling
          ---------------------
source of rights under the Plan. This Plan may only be amended in accordance
with Article VII herein.

     1.5  Sole Source of Severance Benefits.  This Plan shall be the sole
          ---------------------------------
source of severance benefits applicable to any Northwestern Employee who is an
Eligible Employee. No Employee, Officer or Director of the Company may promise
or grant severance benefits to any Northwestern Employee except as provided
herein and any other agreement or representation to the contrary is null and
void unless expressly approved in writing by the Board of Directors or Chief
Executive Officer of the Company or Mid America Federal Savings Bank. When such
an agreement exists, its terms and conditions shall apply and the Employee shall
no longer be eligible to receive benefits under this Plan.


                                  ARTICLE II

                           ELIGIBILITY AND BENEFITS

     2.1  Eligibility.  Except as provided in Section 2.2 and subject to all
          -----------
other exclusions contained in this Plan, a Northwestern Employee will be
eligible to receive Severance Pay if and only if: (a) his employment with all
Employers is terminated in circumstances that constitute a Severance Event; (b)
at the time of such Severance Event, he was employed by an Employer; and (c) he
executes a release of claims as set forth in Appendix A.

     2.2  Eligibility Exclusions.  Notwithstanding the foregoing, a Northwestern
          ----------------------
Employee who incurs a Severance Event will not be eligible to receive Severance
Pay if his employment voluntarily or involuntarily terminates when one or more
of the following circumstances is applicable:

          (a)  The Northwestern Employee is a party to an employment or
               severance agreement providing for payments or other benefits as a
               result of termination of employment; or

          (b)  The Northwestern Employee leaves employment voluntarily, either
               by resignation (other than in circumstances that constitute a
               Severance Event) or retirement; or

          (c)  The Northwestern Employee is on or commences a leave of absence
               or other interruption of employment which does not constitute a
               termination of employment; or

                                       3
<PAGE>
 
          (d)  The Northwestern Employee is offered to continue in his present
               position or is offered another position with the Company or an
               Affiliate with comparable base annual or hourly compensation and
               job responsibilities as determined at the discretion of the Plan
               Administrator and declined to accept such position; or

          (e)  The Northwestern Employee is transferred to another facility or
               location of the Company or an Affiliate at the same or another
               position with comparable base annual or hourly compensation and
               job responsibilities as determined at the discretion of the Plan
               Administrator and declines to accept such transfer; or

          (f)  Employment is terminated as result of the sale of assets or stock
               of an Employer, and the Northwestern Employee is offered the same
               or another position with the successor in interest with
               comparable base annual or hourly compensation as determined at
               the discretion of the Plan Administrator; or

          (g)  The Northwestern Employee refuses to execute a release of claims
               as provided in Section 2.1 hereof; or

          (h)  The Northwestern Employee terminates employment as a result of
               death or disability.

     2.3  Severance Pay.  The Severance Pay provided by this Plan shall be
          -------------
determined based upon the number of Years of Service and Base Weekly Pay of an
Eligible Employee at the time of the Severance Event as follows:

     (a)  All Eligible Employees shall be entitled to receive a benefit equal to
          two (2) Weeks of Severance Pay for each full Year of Service as of the
          Severance Event, subject to a maximum benefit of 26 weeks.  Any
          Eligible Employee who has completed one full Year of Service as of the
          Merger Effective Date shall be entitled to receive a minimum benefit
          equal to four (4) Weeks of Severance Pay. An Eligible Employee who has
          not completed one full Year of Service as of the Merger Effective Date
          shall be entitled to receive a minimum benefit equal to two (2) Weeks
          of Severance Pay.

     (b)  Notwithstanding any provision of this Section 2.3 to the contrary,
          Severance Pay shall be reduced by, or the Eligible Employee shall be
          obligated to refund to the Employer to the extent such Severance Pay
          was not so reduced, the amount of unemployment compensation received
          by the Eligible Employee under any state or other governmental program
          during the period the Severance Pay is payable.

                                       4
<PAGE>
 
Severance Pay shall be subject to all applicable federal and state deductions
and withholding and shall be paid in such manner as prescribed in Section 2.4.

     2.4  Form And Payment Of Severance Benefits Severance Benefits.
          ---------------------------------------------------------
Severance Pay shall be paid in installments on regular pay dates following
termination of employment. Installments shall commence as of the end of the
first pay period that occurs on or after the date the Eligible Employee has
executed the release of claims required by Section 2.1(c) and the seven-day
period for revocation thereof has expired. Installments shall continue until the
earlier of the date that (i) the Eligible Employee dies (in which case the
payment described in Section 2.5 shall be made to the Eligible Employee's
Beneficiary); or (ii) all Weeks of Severance Pay to which the Eligible Employee
is entitled are paid.

     2.5  Lump Sum Death Benefit.  In the event that an Eligible Employee dies
          ----------------------
after a Severance Event and prior to the payment of all of the Weeks of
Severance Pay to which Eligible Employee was entitled and the installments
terminate pursuant to Section 2.4, then a lump sum death benefit shall be paid
to the Beneficiary within 30 days after the date of death. The lump sum benefit
shall be equal to the aggregate amount of the Weeks of Severance Pay to which
the Eligible Employee was entitled but which had not been paid as of the date of
death. Notwithstanding the foregoing, in the event that as of the date of death
the Eligible Employee had not executed the release described in Section 2.1(c),
or if executed, the time for revocation had not expired, then the payment of the
lump sum shall be subject to the execution by the Beneficiary of a release
substantially similar in scope to the provisions of Appendix A.
 
     2.6  Other Benefits.
          --------------

     (a)  Salaries, Wages and Vacation.  Any earned but unpaid salary or wages
          ----------------------------                                        
and any earned but unused vacation for which an Employee is eligible at time of
termination of employment will be paid in a lump sum at time of termination of
employment, subject to applicable federal and state withholding.

     (b)  Insurance.  Employees may be eligible for COBRA continuation coverage
          ---------                                                            
related to medical at full existing COBRA rates following termination of
employment, as provided in the applicable medical care plan.  Applicable
premiums relating to single COBRA continuation coverage will be waived by MAF
Bancorp, Inc. for the first three (3) months of coverage for any Eligible
Employee who receives Severance Pay under this Plan.  No other medical or health
insurance cost subsidies will be provided by an Employer, including any subsidy
relating to dependant COBRA continuation coverage or other insurance benefits.

     (c)  Outplacement Assistance.  Eligible Employees shall receive 
          -----------------------                                    
outplacement assistance, as needed, from the Employer utilizing its resources
within sixty (60) days after a Severance Event.

                                       5
<PAGE>
 
     (d)  General Limitations.  The severance benefits available to Eligible
          -------------------                                               
Employees are limited to the provisions herein.  All qualified or non-qualified
retirement or other plan benefits for which the Eligible Employee may be
eligible shall be governed by the applicable plan's specific conditions.


                                  ARTICLE III

                              PLAN ADMINISTRATION

     3.1  Administration of Plan.  The Plan shall be administered by the Plan
          ----------------------
Administrator unless the Board of Directors of MAF Bancorp, Inc. (as constituted
from time to time), or the person or persons designated by it to carry out its
duties or powers under the terms of this Plan, delegates such authority to
another party.

     The Plan Administrator shall have authority to control and manage the
operation and administration of the Plan including all rights and powers
necessary or convenient to the carrying out of its functions hereunder, whether
or not such rights and powers are specifically enumerated herein.  Without
limiting the generality of the foregoing, and in addition to the other powers
set forth in the Plan, the Plan Administrator shall have the following express
discretionary authorities:

     (a)  to construe and interpret the Plan, decide all questions of
          eligibility and determine the amount, manner and time of payment of
          any benefits hereunder;

     (b)  to prescribe procedures to be followed by Participants for filing
          requests and elections under the Plan;

     (c)  to prepare and distribute, in such manner as determined to be
          appropriate, information explaining the Plan;

     (d)  to receive or request from the Employers or Eligible Employees such
          information as shall be necessary for the proper administration of the
          Plan;

     (e)  to furnish the Employers upon request such annual and other reports
          with respect to the administration of the Plan as are reasonable and
          appropriate; and

     (f)  to determine the amounts available to provide a benefit and to
          administer the claims procedure.

     3.2  Rules and Procedures.  The Plan Administrator may adopt such rules,
          --------------------
regulations and bylaws as it deems necessary or desirable.

                                       6
<PAGE>
 
     3.3  Claims Procedure.
          ----------------

     (a)  Any Employee who believes that he is entitled to a benefit under the
Plan in an amount greater than he has received may file a claim for such benefit
by writing to the Plan Administrator.

     (b)  Every claim which is properly filed shall be answered in writing
within ninety (90) days (or one hundred eighty (180) days if special
circumstances require an extension of time for processing the claim) of receipt
stating whether the claim is granted or denied. If the claim is denied, the
claimant shall be provided specific reasons for denial; specific reference to
the pertinent Plan provisions on which the denial is based; a description of any
information necessary for the claimant to perfect a claim including an
explanation of why such information is necessary; and an explanation of the
Plan's claim appeal procedure including steps to be taken to submit the claim
for review.

     (c)  Within sixty (60) days after notice that a claim is denied, the
claimant may file a written appeal which shall include any comments, statements
or documents the claimant may wish to provide.  Notice of the decision on appeal
shall be sent to the claimant within sixty (60) days of its receipt (or one
hundred twenty (120) days if special circumstances require an extension of time
for processing the appeal).  In the event the claim is denied upon appeal, the
notice shall set forth the reasons for denial written in a manner calculated to
be understood by the claimant and specific reference to the pertinent provisions
of the Plan on which the denial is based.  Any reasonable request from a
claimant for documents or information relevant to his claim prior to his filing
an appeal shall also be allowed.

     (d)  If notice of the denial of the claim or appeal is not furnished in the
time limits set forth above, the claim or appeal shall be deemed denied.

     3.4  Actions of the Plan Administrator.  All determinations, 
          ---------------------------------
interpretations, rules, and decisions of the Plan Administrator or its delegate
shall be conclusive and binding upon all persons having or claiming to have any
interest or right under the Plan and shall be given deference in any judicial or
other proceeding.

     3.5  Delegation.  The Plan Administrator shall have the power to delegate
          ----------
specific duties, discretionary and other authorities and responsibilities to
officers or employees of the Company or other individuals or entities. Any
delegation by the Plan Administrator may allow further delegations by the
individual or entity to whom the delegation is made. Any delegation may be
rescinded by the Plan Administrator at any time. Each person or entity to whom a
duty or responsibility has been delegated shall be responsible for the exercise
of such duty or responsibility and shall not be responsible for any act or
failure to act of any other person or entity.

                                       7
<PAGE>
 
     3.6  Reliance on Experts.  The Plan Administrator and its delegates shall
          -------------------
be entitled to rely on any and all schedules, reports, opinions or advice
furnished by any duly appointed actuary, accountant, legal counsel, physician or
other medical expert and any other duly appointed advisor. Any such advisor may
be a person, firm or other organization acting or employed in like capacity for
an Employer.

                                  ARTICLE IV

                          LIMITATIONS AND LIABILITIES

     4.1  Non-guarantee of Employment.  Nothing contained in the Plan shall be
          ---------------------------
construed as an agreement of employment, or as giving or conferring on any
Employee the right to continued employment, or as a limitation on the right of
an Employer to terminate the employment of an Employee, with or without cause.
Nor shall anything contained in the Plan affect the eligibility requirements
under any other plans maintained by an Employer, nor give any Employee a right
to coverage under any other plan.

     4.2  Non-alienation of Assets and Benefits.  Except as may be
          -------------------------------------
required by applicable law, the benefits payable under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, including any such liability which is for alimony or
other payments for the support of a spouse or former spouse, or for any other
relative of the Employee, prior to actually being received by the person
entitled to the benefit under the terms of the Plan; and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or
otherwise dispose of any right to benefits payable hereunder shall be void.

     4.3  Limitation of Liability.  Neither an Employer nor the Plan
          -----------------------
Administrator shall be liable for any act or failure to act which is made in
good faith pursuant to the provisions of the Plan or records of the Plan,
Company, Employer, or any employee benefit plans thereof, except to the extent
required by applicable law.

     4.4  Indemnification.  The Company and each Employer shall, to the extent
          ---------------
permitted by its Certificate of Incorporation and Bylaws, and by the laws of the
State in which it is incorporated, indemnify the Plan Administrator, and any
employee, officer or director of an Employer, against any and all liabilities
arising by reason of any act or omission made in good faith pursuant to the
provisions of the Plan, including expenses reasonably incurred in the defense of
any claim relating thereto.

                                       8
<PAGE>
 
                                   ARTICLE V

                                    FUNDING

     5.1  Funding.  Benefits shall be paid out of the general assets of the
          -------
Company or applicable Employer. Neither the Company nor any other Employer shall
be required to fund or otherwise provide for the payment of benefits in any
manner.

                                  ARTICLE VI

                                  AFFILIATES

     6.1  Obligation of Employers.  Each Employer agrees to make all payments
          -----------------------
required hereunder to be made on behalf of Eligible Employees of such Employer,
and agrees that the liability for making such payments and providing such
benefits shall be the sole and exclusive obligation of such Employer.

     6.2  Cooperation by Each Employer.  To enable the Plan Administrator to
          ----------------------------
perform its functions, an Employer shall supply full and timely information to
the Plan Administrator on all matters relating to Base Weekly Pay and Years of
Service of all Employees and cause for termination of employment, and any other
pertinent facts or information as a Plan Administrator, in its sole discretion,
may require.


                                  ARTICLE VII

                           AMENDMENT AND TERMINATION

     7.1  General.  The Company reserves the right to amend or terminate the 
          -------
Plan at any time, prospectively or retroactively, and for any reason; provided,
however, that any such amendment or termination which adversely affects any
Northwestern Employee shall not be effective unless such Employee has consented
thereto in writing.

     7.2  Amendments.  Any and all amendments shall be made in writing and shall
          ----------
be signed and approved by the Board of Directors of MAF Bancorp, Inc. (as
constituted from time to time), or the person or persons designated by its to
carry out its duties or powers under the terms of this Plan.

                                       9
<PAGE>
 
                                 ARTICLE VIII

                           MISCELLANEOUS PROVISIONS

     8.1  ERISA.
          -----

          (a)  Any person or persons may serve in more than one fiduciary
capacity with respect to the Plan.

          (b)  The Plan Administrator shall be a "named fiduciary" with respect
to the Plan; however, its responsibilities as such shall be limited to the
performance of those duties specifically assigned to it hereunder.  The Plan
Administrator shall have no responsibility for the performance of any duty not
specifically so assigned, except to the extent required by applicable law.

          (c)  The Plan Administrator may allocate or delegate its
responsibilities hereunder to persons who are not named fiduciaries.  The
allocation or delegation of any fiduciary responsibility shall be in writing,
and shall become effective upon the written acceptance thereof by the person or
persons to whom such responsibilities are allocated or delegated.

     8.2  Applicable Law.  This Plan shall be construed in accordance with
          --------------
federal law under ERISA; provided, that nothing in this Section 8.2 shall be
construed as placing any restriction upon the right of an Employer acting
pursuant to the Plan to take any action or to incur any liability which it is
authorized to take or incur under its Certificate of Incorporation or Bylaws, or
under the laws of the State in which it is incorporated, except to the extent
that the same are superseded by applicable federal law.

     8.3  Exclusive Benefit of Participants.  This Plan is for the exclusive
          ---------------------------------
benefit of Eligible Employees and their beneficiaries.

     8.4  Agent for Service of Process.  The Plan Administrator shall be the
          ----------------------------
agent for service of process.

                                       10
<PAGE>
 
                                  APPENDIX A
                        RELEASE AND SEVERANCE AGREEMENT
                        -------------------------------

     THIS RELEASE AND SEVERANCE AGREEMENT is made and entered into this ____ day
of _______________, _____ by and between MAF Bancorp, Inc., its subsidiaries and
affiliates, including but not limited to Mid America Federal Savings Bank,
successor to Northwestern Savings Bank, and the Northwestern Savings Bank
Severance Benefits Program (collectively "MAF") and the undersigned employee
(hereinafter "EMPLOYEE").

     EMPLOYEE'S employment with MAF terminated on ______________, ______; and
EMPLOYEE has voluntarily agreed to the terms of this RELEASE AND SEVERANCE
AGREEMENT in exchange for Severance Pay under the Northwestern Savings Bank
Severance Benefits Program ("Program") to which EMPLOYEE otherwise would not be
entitled.

     NOW THEREFORE, in consideration for Severance Pay provided under the Plan,
EMPLOYEE on behalf of himself and his spouse, heirs, executors, administrators,
children, and assigns does hereby fully release and discharge MAF, its officers,
directors, employees, agents, subsidiaries and divisions, benefit plans and
their administrators, fiduciaries and insurers, successors, and assigns from any
and all claims or demands for wages, back pay, front pay, attorney's fees and
other sums of money, insurance, benefits, contracts, controversies, agreements,
promises, damages, costs, actions or causes of action and liabilities of any
kind or character whatsoever, whether known or unknown, from the beginning of
time to the date of these presents, relating to his employment or termination of
employment from MAF, including but not limited to any claims, actions or causes
of action arising under the statutory, common law or other rules, orders or
regulations of the United States or any State or political subdivision thereof
including the Age Discrimination in Employment Act and the Older Workers Benefit
Protection Act.

     EMPLOYEE acknowledges that EMPLOYEE'S obligations pursuant to applicable
policies of MAF, copies of which have been provided to EMPLOYEE, and under
applicable law relating to the use or disclosure of confidential information
shall continue to apply to EMPLOYEE.

     This Release and Settlement Agreement supersedes any and all other
agreements between EMPLOYEE and MAF except agreements relating to proprietary or
confidential information belonging to MAF, and any other agreements, promises or
representations relating to severance pay or other terms and conditions of
employment are null and void.

     This release does not affect EMPLOYEE'S right to any benefits to which
EMPLOYEE may be entitled under any employee benefit plan sponsored by MAF.

                                  Page 1 of 3

<PAGE>
 
     EMPLOYEE and MAF acknowledge that it is their mutual intent that the Age
Discrimination in Employment Act waiver contained herein fully comply with the
Older Workers Benefit Protection Act.  Accordingly, EMPLOYEE acknowledges and
agrees that:

          (a)  The Severance Pay exceeds the nature and scope of that to which
     he would otherwise have been legally entitled to receive.

          (b)  Execution of this Agreement and the Age Discrimination in
     Employment Act waiver herein is his knowing and voluntary act;

          (c)  He has been advised by MAF to consult with his personal attorney
     regarding the terms of this Agreement, including the aforementioned waiver;
 
          (d)  He has had at least forty-five (45) calendar days within which to
     consider this Agreement;

          (e)  He has the right to revoke this Agreement in full within seven
     (7) calendar days of execution and that none of the terms and provisions of
     this Agreement shall become effective or be enforceable until such
     revocation period has expired;

          (f)  He has been informed in writing of (i) the eligibility factors
     under the Plan, (ii) the group of employees, including the job title and
     age of each, eligible to receive Severance Pay, (iii) the ages of all
     individuals in the same job classification or organizational unit who are
     not eligible to receive Severance Pay, and (iv) any time limit applicable
     to the Plan;

          (g)  He has read and fully understands the terms of this agreement;
     and

          (h)  Nothing contained in this Agreement purports to release any of
     EMPLOYEE's rights or claims under the Age Discrimination in Employment Act
     that may arise after the date of execution.

     IN WITNESS WHEREOF, the parties have executed this Agreement on the date
indicated above.

MAF BANCORP, INC.,                      EMPLOYEE
for itself and its Subsidiaries
and Affiliates

By:________________________________     ________________________________________
Its:_______________________________     (Signature)

                                  Page 2 of 3

<PAGE>
 
                                        ______________________________
NORTHWESTERN SAVINGS BANK               (Print or type name)
BENEFITS PROGRAM


By:_______________________________
Its:  Plan Administrator

                                  Page 3 of 3